Perpetual queries long-standing cross ownership

Washington H Soul Pattinson
and
Brickworks
shareholder,
Perpetual
, has backed a plan to unwind the cross-shareholding between the two companies.

Perpetual head of equities Matt Williams said the proposal from broker Hunter Green, unveiled in The Australian Financial Review yesterday, made sense and would unlock value for investors.

“This benefits all shareholders. It particularly benefits minority shareholders such as Perpetual and thousands of other smaller shareholders whose interests the independent directors are there to serve," Mr Williams told The Australian Financial Review yesterday.

He called on Brickworks’s three independent directors in particular to review the proposal and agree to Hunter Green’s strategy to break up the cross-shareholding structure and unlock the value for shareholders.

Hunter Green wants Brickworks to sell its Soul Patts shares to its shareholders in two tranches to pay down debt and also unravel the cross-shareholding between the two companies. Soul Patts owns 48 per cent of Brickworks and the brick group owns 42 per cent of the listed investment group as part of the cross-shareholding structure. The broker believes the plan could lift the value of Brickworks shares by about 47 per cent.

Mr Williams agreed that Brickworks shareholders would be better off if the strategy were implemented. He said Brickworks’ independent directors –
David Gilham
,
Robert Webster
and
Brendan Crotty
– were in a unique position to advocate the proposal. It is understood the three directors have a copy of the Hunter Green proposal.

Mr Williams, a vocal and consistent critic of the cross-shareholding, also expressed frustration at the lack of information from Brickworks and Soul Patts chairman
Robert Millner
since he said the broad structure would be reviewed at the Soul Patts annual meeting last December.

At the meeting Mr Millner said the board would review the structure of the company and could seek to appoint additional directors if it sold the group’s biggest investment, New Hope.

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“The bid process for New Hope has come and gone and shareholders in the broad group are none the wiser about anything. Meanwhile the large discount to true value that Soul Patts and Brickworks trade at persists," Mr Williams said.

Mr Williams has complained to the Australian Securities and Investments Commission over the issue. The regulator said the long-standing arrangement did not breach Corporations Law but pointed out that it would not be allowed under current regulations.

Mr Millner could not be reached for comment. He has consistently defended the cross-shareholding, arguing the structure insulated both companies from extremes in the market and the economy.

Brickworks’ net profit after tax fell 53 per cent to $54.1 million for the half year ending in January with every division reporting a fall in earnings, despite its stake Soul Patts. “Imagine if Brickworks was a stand-alone business," Mr Millner said at the time.